If American’s can believe anything anymore about Congress and the Estate Tax it is that they proven incapable of the most simple acts of governance. For nine years everyone knew the tax would expire in 2010 yet despite that knowledge Congress was unable to agree on a compromise so it expired. Now with just a few weeks left in 2010 we are no further ahead than where we were last year at this time. The Wall Street Journal notes that the tax is about to return with a vengeance:

Overlooked in the brawl over expiring Bush-era tax rates is what will happen to the death tax. Without action in the lame duck Congress, the estate tax will rise from the dead on January 1 with a vengeance, the rate climbing back to 55% from zero this year. The exemption amount will revert to a miserly $1 million, unindexed for inflation, so more middle class taxpayers will get hit year after year.

Of course there are compromises that are possible, but given recent Congressional inaction, on the same subject one cannot assume one will actually pass:

Liberals are content to let the rate revert to 55%, with some moderate Democrats arguing for a 45% rate. Republican Jon Kyl of Arizona and Democrat Blanche Lincoln of Arkansas are pushing a compromise that would lower the top rate to 35% with a $5 million deduction. That rate is still 35 percentage points too high for our liking, but we’ll take it as an alternative to the greedy political confiscation of more than half of the wealth built by someone who has saved over a lifetime. An estate of $5 million isn’t all that much for a successful and thrifty business person with some real estate to accumulate over 50 or 60 years.

Most Americans appear to favor some compromise–unfortunately most Americans are not serving in Congress:

President Obama and Congressional Democrats don’t think this is a high priority, but voters do. A November Gallup Poll found that Americans think that keeping the estate tax “from increasingly significantly” is “very important” by 56% to 17% “not too important.” That’s more than think it is a priority to extend current tax rates (50%), extend jobless benefits (48%), ratify the Start treaty (40%) or let openly gay men and women serve in the military (32%).

Congress really only has until about mid month when it adjourns for its current session, and the remainder of the year. Further inaction will only hurt middle class families more, particularly since they are the least able to cope with the new estate tax rates than are the heirs of the very wealthy. Stay tuned . . .

An interesting special report from the Tax Foundation entitled: The Federal Estate Tax: Will it Rise From the Grave un 2011 or Sooner? You can read the entire report here: The Federal Estate Tax. See also here.